Properties, Homes & more

Reference: The Economic Times

Home loan providers are now insisting on construction-linked disbursal of funds to new projects, as they look to make developers more accountable after getting stuck in several stalled projects.

A number of developers have either stopped construction midway or slowed down due to shortage of funds and poor sales in 2008 and 2009. Lending institutions expect the move to help them monitor the progress of construction and make developers accountable, said a senior executive with a public sector bank. “Buyers in such projects are in a difficult situation. They have to pay monthly installments towards the loan without getting the possession of house. They also end up shelling out monthly rents during the period,” he said, requesting anonymity.

HDFC, one of the largest lenders in the home loan segment, has, allegedly, discontinued the practice of upfront disbursals and linked the flow of funds to progress of construction.

Developers initially used to offer homebuyers up to 10% discount on upfront payment. These developers subsequently diverted substantial part of funds to other projects. The delay in completion of work left buyers in a lurch. There is a high probability of default by such borrowers.

In construction-linked payment, the home finance companies or banks do not release the funds up front. They release of around 30% funds initially and the rest is disbursed as per the progress of projects. In such cases since the exposures are not full and the monthly repayment obligation for borrowers will be lower.

Many developers have now changed the payment schedule to construction-linked as against timebound payment. This is good for the industry. However, banks and home finance companies should release 30-35% of the funds towards the land and development cost. The lenders have also become more conservative in disbursal of loans. In a volatile real estate market, they offer lower valuations for the property against which they disburse the funds.

According to industry estimates, disbursements of home loan in the organised system of financing in the first six months of the current fiscal has been around Rs 60,000 crore. In 2008-09, it touched Rs 1,00,000 crore approximately, while in 2007-08 the amount was around Rs 1,30,000 crore.

Kotak Mahindra Bank joins rate war, offers 8.49% fixed rate for home loans. After banking biggies - SBI, ICICI and HDFC - it is now the turn of Kotak to announce its special home-loan scheme, offering an 8.49% fixed interest for first 30-months.

The special offer can be availed for all new loans irrespective of the loan amount, but will be limited till January 31, 2010, the bank said in a press release. The private sector lender will charge floating rates (prevailing at that time) on these loans after the 30-month period, which will be decided based on the retail prime lending rate, the bank said. While the fixed duration loan rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount, the bank said.

With the culture of individual houses and palatial bungalows fast becoming thing of past, Allahabad has been rather quick in adopting the flat culture, which until now was limited to metros only. The flat system is considered to be safe, secure and useful for social activities, especially for the older generation. It is here that the role of Allahabad Development Authority (ADA) assumes great significance.

ADA, originated in 1974, was formed under the provision laid by the Uttar Pradesh Urban Planning & Development Act of 1973. ADA development projects began with smaller projects & constructions but soon progressed and changed the city’s look with its magnificent works. Uttar Pradesh is one of the most politically important states of India, and Allahabad is indeed an important city of that state with long historical and cultural background. It attracts a lot of people and tourists from all over the world and hence the need for establishment of development authority to overlook planned development of the city.

ADA plans to construct state-of-the-art infrastructure for its residential and commercial projects in a well planned manner by adhering to the master plan laid out by the authorities. It also started many housing schemes like Avantika, Kalindipuram, Juhi, Badri, Parivartan, Shantipuram, Agnipath, and IDH Compound Housing Scheme. In order to give a progressive direction to the development process of real estate in Allahabad, it has started working in conjunction with private builders and developers.

The latest real estate developments in city primarily focus on building hotels, guest houses, dharmashalas, restaurants, retail shops and other tourists’ spots. The real estate property prices in city are also mounting as more and more people are heading towards the efficient business opportunities the city offers. The property dealers are, surprisingly, fully supportive in the sale or renting of any property in Allahabad.

<< Jerry Rao’s interview on creating low cost housing the professional way

Jerry Rao, founder of IT firm Mphasis, wants to deliver low-cost good-quality homes to buyers like drivers, housemaids, plumbers and electricians. Jerry Rao’s new venture, Value and Budget Housing Development Corporation, is targeting building a million homes in 10 years in 17 cities. Excerpts of an exclusive interview with ET, Jerry Rao (JR) defends his new mantra…

Interviewer (I): How will you address the backend challenges? Your buyers constitute the unbanked part of the population!!

JR: There are two big demand-side challenges. One, unlike in Manila and Sao Paolo, where poor and rich neighbourhoods are far away, in Indian cities, the poor live inside the city. Now, we are giving them housing far away. So, there is a commute cost and a commute time. That is a demand-side dampener.

The second is they may want to buy but how many of them will qualify for a loan. That certainly reduces the size of the market. But, believe me, these people have the ability to downpay Rs. 50,000 to Rs. 1.5 lakh. These people live frugally and save a lot. Over time, we believe the system will be in a position to offer 15-year mortgages in the Rs 2-8 lakh range.

I: What is your assessment of the buyer profile?

JR: They may be poor but they are upwardly mobile - these are NOT the absolute destitutes or the pavement dwellers. What they want is to get out of their present shanty / to a more secure place. They want compound walls, security, indoor toilet and privacy. Most want their children to go to English medium schools. The target buyer is someone, who has an income and also high labour mobility so that even if he moves to the city outskirts, he would get a replacement job pretty quickly. Like a driver or high-skilled construction worker.

--- As told to the Economic Times ---

In a major jolt to the already depressed real estate market in Jaipur, more than 1,000 investors were allegedly duped of at least Rs. 80 crore by a big-time city realtor, the Narayan Group. Some others were also duped by Subhash Sindhi Co-operative Society and Mahaveer Nagar Co-operative Society.

This shocking fraud came to the light when the Special Operations Group (SOG) recently arrested six persons, including Narayan Group’s owners Gyanchand Agrawal and his partner Sanjay Gupta. The SOG claimed the proprietors of Narayan Group have confessed to duping at least 1,000 investors. However, the number could be higher. According to SOG, the Narayan Group issued lease deeds to more than 2,200 people. After the group made huge profits in a project called Narayan Vihar A, B, C and D blocks in Mansarovar, they announced some more schemes, but in these schemes, they issued fraudulent lease deeds to people without having enough land.

Of the 2,200 people who had invested in the projects, many were given plots elsewhere instead of the places where they had been promised plots, while more than 1,000 people were not given possession at all. Three persons — Gyanchand Agrawal, Sanjay Gupta and one employee, Ravindra Pal Singh — of Narayan Group, were arrested. The SOG has seized documents related to properties and prima facie it seems that the number of those duped could be much higher than 1,000. The maximum number of fraudulent lease deeds were issued between 2004 and 2006.

In yet another fraud, one Jeevraj Singh approached the SOG alleging that proprietor of the Mahaveer Nagar housing co-operative society - Nankishor Mittal - took Rs 7.20 lakh from him for a plot at Shriram Ki Nagala in Sanganer, but did not give him possession. The SOG arrested Nandkishor and two others —Vipin and Shailendra.

--- As reported in the Times of India ---